Finland was historically a country of rent controls. Waves of restrictions were imposed, first after Finland gained independence from Russia in 1917, then during World War II, and then again during the 1960s, says Harri Hiltunen, chief executive of Kiinteistöliitto, the real estate association of Finland, and a former government housing adviser.
Every aspect of the private rental sector was controlled by the Government and there were strict rules to limit evictions.
By the 1990s, rental supply was crumbling. Even in Helsinki – where higher prices meant landlords arguably had the most incentive to stay in the market – the number of rental properties fell by 11pc between 1975 and 1985, according to Census and Statistics Finland.
As supply declined, the rent controls also effectively stopped working.
“We had a black market,” says Hiltunen. “Landlords were asking for rents that were far higher than the regulations, and people were paying them.”
Because these rents were illegal, landlords simply did not declare them to the tax office, he adds.
A secondary market also sprang up, whereby companies would lease buildings from landlords and then sublet properties to their employees, says Hiltunen. “That was another way to bypass the regulation.”
Landlords who obeyed the rules were often unable to raise rents enough to pay for maintenance, Hiltunen adds, prompting more and more to sell up.
Then in the 1990s, Finland was hit by an economic crisis after the collapse of the Soviet Union.
“A lot of Finnish construction companies had built dwellings that they were not able to sell,” says Hiltunen.
In response, the Finnish Government lifted rent controls for new contracts in 1993 and then for all existing contracts in 1995.
Once the restrictions were lifted, rental supply bounced almost immediately. Between 1990 and 2000 the number of rental properties in Finland jumped by 45pc, according to Statistics Finland.
Free market beats price regulated market. Well I never…….
By the late 1970s the British rental market was exactly that constipated and that’s why assured shortholds were invented……